The $8 trillion arms surge fuelling AI — and spooking bonds: Mike Dolan
TLT•G7 governments may add about $8 trillion in defence spending over the next decade, with much of the investment expected to target technology, drones, cybersecurity and battlefield AI. The spending adds to borrowing needs as G7 government borrowing costs reach their highest since mid-2008, according to the article.
1. Defence spending expands
Former U.S. Navy Admiral James Stavridis estimated that additional G7 defence commitments over the next decade total about $8 trillion, on top of prior trends. The G7’s defence spending has risen to 2.0% of GDP, its highest share in more than 30 years, and is projected to reach 3.8% by 2030. In Europe, broader defence goals imply €4 trillion to €5 trillion in additional spending, potentially rising toward €9 trillion when adjacent infrastructure is included.
2. Technology overlap grows
Stavridis said procurement is likely to shift away from warships and tanks toward technology, drones, cybersecurity and battlefield AI. He described a move toward smaller companies in cyber, encryption and hypersonics, with smaller and more numerous deals. Data centres and their security are another area shared by AI and defence investment.
3. Borrowing costs rise
The article says the planned spending will increase borrowing needs as bond markets absorb government debt. Average G7 government borrowing costs are at their highest since mid-2008, while annual interest expenses are nearly 85% higher. Advanced economies paid more than $3.3 trillion in interest on internationally traded government bonds over the past year, compared with estimated global spending of $2.6 trillion on AI and $3.1 trillion on defence.
